MACPAC Calls for Improved Targeting of DSH Payments to Providers

April 21, 2017

Medicaid Payment Perspectives helps Medicaid programs and other payers improve the methods used to purchase care and services for their beneficiaries. It’s published by the Payment Method Development team at Conduent.

The Medicaid and CHIP Payment and Access Commission (MACPAC) urges federal policymakers and state programs to better target hospitals that serve a high number of Medicaid patients for Disproportionate Share Hospital payments (DSH). DSH allotments are scheduled to decline $2 billion in FFY 2018, raising the urgency to identify hospitals that most need DSH payments. These payments may be necessary to buffer hospitals against losses for uncompensated care and ensure access for Medicaid beneficiaries.

For CMS, this means updating the methodology for distributing DSH payments among states. Currently, the federal criterion for receiving DSH payments is a 1 percent Medicaid utilization rate, which MACPAC argues is too broad a threshold. Indeed, more than 80 percent of hospitals in five states receive DSH payments and another 18 states pay DSH to more than half of their hospitals. In its March report to Congress, MACPAC recommends a relative standard based on a state’s average Medicaid utilization rate and a DSH standard that identifies hospitals that are statutorily required to receive DSH payments.

States have a great deal of flexibility in how to distribute DSH payments. According to MACPAC, “34 states submitted 173 Medicaid state plan amendments between 2012 and 2016 to change their DSH policies. These amendments ranged from incremental changes to the amount of DSH funding for particular types of hospitals to changes to the types of hospitals eligible to receive DSH payments.”

MACPAC’s basic argument is that narrowing the list of hospitals eligible for DSH payments will ensure that access at hospitals is undisturbed at hospitals with the highest Medicaid market share.

In addition to its analysis and recommendations on DSH payments, MACPAC’s March report also recommends extending federal CHIP funding through FY 2022 to “assure the stability and continuity of health insurance coverage for low- and moderate-income children at a time of tremendous uncertainty in health insurance markets.” The report also looks at how states monitor beneficiary access in both fee-for-service and managed care environments.

For more information about the Payment Method Development team at Conduent, visit us online or contact Andrew Townsend at

You can read more Conduent insights about Medicaid payment in previous editions of Medicaid Payment Perspectives.

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